Tips for saving money in tough times

Luke Johnson

Every business I know has been through the wringer during the past two years. Sadly the good times aren’t returning any time soon. So I’ve compiled a list of some more creative and worthwhile ways companies can save money to help entrepreneurs keep afloat in spite of the challenges.

*Use open-source software. Free software such as Linux is used by millions, including organisations like Google, Ticketmaster and the Canadian government. They pay no licence fees, and the mainstream systems are constantly supported by armies of volunteers around the globe. Many in the IT industry hate the concept because it undermines much of its business model, but qualified advocates are becoming more and more common.

* Do random expense claim audits. Abuse of expenses is endemic, but if staff know that even their mobile phone bills are checked occasionally, then they are less likely to take advantage. You should have very clear expense policies, so fiddlers are not able to use confusion to get away with cheating.

*Use procurement specialists. For costs like electricity and insurance, it can pay to pool your buying power with others and negotiate bulk discounts, especially if you run a small business. You can organise this on an ad hoc basis with partners or formal consortia that work together to drive efficiencies.

*Barter. For a start-up this can be especially valuable. Whatever service you offer, see if you can trade it with your suppliers in exchange for their services. Far too few entrepreneurs try this, but at the very least you may be able to negotiate discounts in return for goods in kind.

*Buy second-hand. We frequently buy reconditioned kitchen equipment for our restaurants. Do not hesitate to choose used over showroom-new if it makes economic sense.

*Lead from the front about costs. As a boss, you should constantly question costs and try to be seen to be abstemious rather than extravagant - at least with corporate assets. If you are a spendthrift, you set a poor example that others will copy - with the company’s money.

*Sign the cheques. Many of the most successful founders I know still sit down and pay all the bills every week, so they see exactly how the money is spent. They scrutinise unusual items and bring a proprietor’s conscientious attitude to bear.

*Ask for early payment discounts. If you have the cash, it might be a great way to improve your margins. If your suppliers are under financial pressure, they may well agree a 5 per cent discount for swift settlement. It would take almost two years with current low interest rates to earn that much if you kept the money in the bank.

*Monitor absenteeism. Apparently almost two-thirds of employers don’t bother. But on average the cost per staff member of absence in the UK is - 692. It damages productivity and puts extra pressure on staff who do show up. You should put absence targets in place and adopt return-to-work interviews where appropriate.

*Use auctions to purchase. Online bidding for supplies is increasingly common, especially in areas such as graphic design and web programming. There are many Ebay-style websites where you can put up your brief for auction. I recently used this system to get a pretty decent website built for less than - 2,000.

*Understand what everyone does. At least once a year, undertake a thorough analysis of all staff roles and try to work out their true productivity - and rationalise posts if necessary. Remember: no one ever tells you they are underworked or that their contribution is inessential.

*Question travel. Video and teleconferencing can replace many expensive trips to meetings. A modest investment in the latest technology can save enormous amounts of time and travel expense. Connecting with people face-to-face should only be necessary if the alternatives really don’t deliver. Too often staff go on jaunts just because they like time out of the workplace.

*Just shut the HQ. Admittedly a radical step, but with modern technology, everyone can work remotely and much can be outsourced.

The Financial Times